First Thing Today | September 15, 2022

Good morning!

Light corrective trade overnight... Corn and soybeans mildly rebounded overnight from losses the two previous days, while wheat pulled back from recent gains. As of 6:30 a.m. CT, corn futures are trading around a penny higher, soybeans are 2 to 4 cents higher, SRW wheat futures are 5 to 8 cents lower, HRW wheat is 3 to 5 cents lower and HRS wheat is steady to fractionally lower. Front-month crude oil futures are around $1.50 lower and the U.S. dollar index is trading near unchanged.

Tentative agreement to avert national rail strike... Major U.S. railroads and unions representing 115,000 of their workers reached tentative agreement giving them better pay and improved working conditions, President Joe Biden said in a statement on Thursday. Biden said, “The agreement is also a victory for railway companies who will be able to retain and recruit more workers for an industry that will continue to be part of the backbone of the American economy for decades to come.” A Department of Labor official confirmed a deal “that balances the needs of workers, businesses, and our nation’s economy” was reached in the early hours of the morning on Thursday after 20 consecutive hours of negotiations between rail companies and union negotiators. “Our rail system is integral to our supply chain, and a disruption would have had catastrophic impacts on industries, travelers and families across the country.” Details of the tentative agreement have not been shared, and could still be voted down by members who need to ratify the deal to settle the matter. Earlier this week, two unions rejected proposed tentative agreements brokered by labor leaders, indicating broader anger among union members about the deal proposed by Biden’s board.

European Commission announces emergency package for energy crisis... The European Commission announced a new package of emergency measures Wednesday to help tackle its worsening energy crisis, including steps to curb historic electricity prices for consumers and avoid a bloc-wide supply crisis this winter. The plan includes a windfall tax on fossil fuel companies, mandatory electricity rationing for countries during hours of peak consumption and extending emergency credit lines for power companies. Excess profits from energy companies would be redistributed to individuals and small businesses. It also calls for cross-border agreements to help distribute the clawed-back windfall revenue across multiple countries. A cap on natural gas prices is not in the plan. Germany, the Netherlands, and Denmark opposed an overall gas cap, citing fears of market competition. Leaders will convene Sept. 30 to vote on the energy package, which will require approval of all 27 member states.

Europe factory output contracts... Euro zone industrial production fell 2.3% in July from the previous month, the first decline since March as factories struggled with high energy costs caused by the ongoing war in Ukraine. Russia has blocked its natural gas from reaching Europe, driving up production costs and threatening the livelihood of some manufacturers. Many economists expect high energy costs will tip Europe’s main economies into recession in the coming months.

China pauses monetary policy easing... China’s central bank partially rolled over maturing medium-term policy loans while maintaining its interest rates. The pause in monetary easing came as the yuan bears increasing downside pressure after the People’s Bank of China (PBOC) surprised markets in August by lowering key rates, a move that further widened policy divergence with other major central banks that are raising rates aggressively. PBOC said it will keep the rate on 400 billion yuan ($57.46 billion) worth of one-year medium-term lending facility (MLF) loans to some financial institutions unchanged at 2.75%. With 600 billion yuan worth of such loans maturing on the same day, that resulted in a net withdrawal of 200 billion yuan from the banking system.

Weekly Export Sales data resumes this morning... USDA will release four weeks of export sales data. The weeks ended Aug. 18 and Aug. 25 will be combined in a single report, while separate reports will be issued for the weeks ended Sept. 1 and Sept. 8. For the week ended Sept. 8, traders expect:

NOPA August crush expected to be down from month-ago, but up from last year... Analysts expect members of the National Oilseed Processors Association (NOPA) to report August soybean crush totaled 166.1 million bu., which would be down 2.4% from July but up 4.6% from last year and the second highest August figure behind 2019. Soyoil stocks are expected to decline to a 13-month low of 1.658 billion pounds.

Pakistan wheat crop, quality concerns... Pakistan’s wheat production could be a lot lower than most, including USDA, are projecting, according to several sources. Aid agencies and officials warn that Pakistan’s cataclysmic floods could spread waterborne diseases and increase food shortages, further straining a population already reeling from climate disaster and record inflation. Months of flooding have inundated Pakistan, submerging one third of its territory and transforming once-populated lands into shrinking islands. Based on government estimates, it could take up to six months for the flooding to recede — a timeline that could have worrying consequences as waterborne diseases spread.

Firm raises EU wheat crop forecast, but cuts export outlook... Strategie Grains raised its outlook for the 2022-23 EU wheat crop by 800,000 MT to 124.1 MMT, though that would still be 4.4% lower than the previous year. However, it cut the EU wheat export outlook by 300,000 MT to 28.7 MMT. That would be virtually in line with 2021-22 shipments.

Kazakhstan lifts restrictions on wheat, flour exports... Kazakhstan’s ag ministry lifted restrictions on exports of wheat and flour as of Sept. 14. Exporters are now freely allowed to sell wheat and flour onto the world market. Previous quotas were originally expected to run through Sept. 30.

Deepening China/Russia ties... Chinese President Xi Jinping and Russian President Vladimir Putin are set to meet today in Samarkand, Uzbekistan, in their first face-to-face meeting since Russia invaded Ukraine Feb. 24. The Kremlin said the two leaders are expected to discuss Taiwan and the war in Ukraine.

Indonesia lowers palm oil reference price, export tax... Indonesia set its crude palm oil reference price for Sept. 16-30 at $846.32 per metric ton, down from $929.66 for the first half of the month. The new reference price would place the export tax at $52 per metric ton, down from the current $74 rate.

Slow developing cash cattle trade... So far, only light cash cattle trade has occurred at steady to $1 lower prices in the northern market. Cash sources signal packers are short-bought on slaughter needs but are hesitant to get aggressive with bids amid the railroad uncertainty.

Cash hog index down, but pace off losses slows... The CME lean hog index is down another 9 cents to $97.58 (as of Sept. 13), though that’s the smallest daily decline in weeks. The cash index is at its lowest level since Feb. 18, but still $2.88 above where October lean hog futures finished on Wednesday.

Overnight demand news... Japan purchased 97,373 MT of wheat from its weekly tender, including 31,120 MT U.S. and 66,253 MT Canadian. Saudi Arabia tendered to buy 535,000 MT of wheat.

See ‘Policy Updates’ for late-breaking morning news updates... For updates to items in “First Thing Today” or any late-breaking morning news stories, check “Policy Updates” on www.profarmer.com.

Today’s reports

• 7:30 a.m. Weekly Export Sales — FAS
• 11:00 a.m. Feed Grains: Yearbook Tables — ERS
• 2:00 p.m. National Conservation Practice Adoption Motivations Survey — NASS